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The Silver Lining of the Retail Counterfeiting Culture in China

By The Grin Labs

At face value the retail counterfeiting culture in China would certainly seem to be a bad thing. No brand wants cheap knock-offs of their products undercutting their profits – especially those in the luxury market, where prestige and quality goods are brand pillars.

But for global brands breaking into the Chinese market, the counterfeiting culture can be a secret weapon if used properly. Before I tell you why, let’s take a look at the culture itself.

Counterfeiters don’t discriminate

Counterfeiting is an endemic part of the societal fabric in China – not just with luxury products like handbags, but food, car parts, hospital equipment, etc.

According to Homeland Security Newswire, “Some economists say 8 percent of China’s GDP comes from the sales of counterfeit goods, from software to designer clothing.” That was in 2011. Some sources claim that percentage is now higher.

Either way, if that number is close to the mark there’s not much incentive for even the government to actively work to curb the practice.

So while brands can try to control the counterfeiting problem – Kering SA, owner of Gucci, Yves St. Laurent, and other luxury brands recently filed suit with Alibaba for allegedly allowing counterfeiters to sell goods on their website – they may never get entirely away from it.

It will be interesting to see what impact the outcome of this suit may have.

In the meantime, without the resources to put an end to counterfeiting, brands are better off using it to their advantage.

What Chinese consumers want most in a brand

Chinese consumers shop brands they recognize and trust – which means getting established in China can be a bit of a catch-22. How do you get established without trust, and how do you gain trust if you’re not established?

This is one way the counterfeiting culture can benefit brands – by creating awareness and recognition – because counterfeiters don’t make products unless there’s a demand for them. From that perspective, the very nature of a counterfeiting presence is a plus.

The issue then becomes about control, and protecting your brand’s IP in the supply chain, which means strategically getting your brand name out there so people get familiar with its value and quality, making authentic products more appealing than the lower-priced knock-offs.

How do you create this value for your brand? By:

Creating a website on Tmall to build recognition via a consumer-trusted platform you can use as your online store

Creating a presence on Taobao, as this is often a first stop for consumers, used more like a search engine for comparison shopping and finding the best prices

Focusing promotional efforts on social media – like WeChat – since most shopping in China happens via mobile (which is predicted to “surpass sales on personal computers in 2016 and reach 61.7% of online sales in 2018” according to Beijing-based iResearch), and traditional media isn’t an option for B2C connections

Following these tips will help you build your brand’s presence with Chinese consumers and show them the real deal is a better deal from a quality standpoint.

Considering “91% of Chinese consumers say authenticity is the top factor in choosing a product” [Source: Lessons From China’s Counterfeit Crackdown, Bruce Einhorn, BloombergBusinessweek, May 7, 2015] that’s not an impossible task.